Directors in Capital & Merchant put their interests ahead of depositors, however there was no proof they intended to breach the company’s trust deed, according to a lawyer for two jailed directors.

Speaking in the Court of Appeal in Wellington today, Bruce Gray said Justice Edwin Wylie had asked the wrong question when he convicted Capital & Merchant directors Neal Nicholls and Wayne Douglas on fraud charged.

The pair were both given seven and a half years in prison following a trial in the High Court in Auckland earlier this year. Former chief executive, Owen Tallentire, who was jailed for five years, has separate legal representation at the appeal.

Capital + Merchant went into receivership in November 2007 owing 7000 investors $167m. The three directors were sentenced on charges relating to several of the company’s transaction following an investigation by the Serious Fraud Office.

The appeal being heard today and tomorrow is against both the conviction and the sentence. Gray told the Court of Appeal said the transactions for which his clients where convicted contained facts ‘‘which were not attractive’’ the judge in the trial appeared to have wrongly assumed intent, when none was proven.

He conceded that Nicholls and Douglas had put their interest ahead of the company’s depositors, but the charges required that they knowingly breached the company’s trust deed.

‘‘The evidential question that section 220 [of the Crimes Act] requires to be answered...[is] was there an intentional breach of the trust deed? [That] cannot be answered simply from inferences drawn from unattractive transactions.’’